How indie clothing company Preloved shifted gears and kept its street cred

The world of independent fashion boutiques, much like indie music retailers, has been radically reshaped by the onset of online commerce.

That is partly why Preloved, a stalwart of the funky Queen Street west retail strip in Toronto since the 1990s, completely upended its business model while some of its peers on the street chose to close their doors.

“The retail landscape 10 years ago was a whole different place,” said owner Julia Grieve. “If you wanted to buy something cool, fun and edgy, you had to go to Queen Street. You weren’t getting it online, and you certainly weren’t getting it in grocery stores.”

Preloved earned its street cred by combining original designs with a unique business hook that garnered it many early fans in the budding sustainability movement — its one-of-a-kind garments are made from previously worn and discarded clothing.

The retailer was founded by Ms. Grieve and two partners in 1995 with just $12,000 — they pooled $6,000 of their own cash and a government small business youth grant matched their investment. She later bought them out and became sole owner.

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But after years of solid growth and new stores — at its strongest point Preloved had two Toronto outlets and a store in Montreal and Vancouver and made the bulk of its revenue from its retail business — it made sense to shift the business model.

“The numbers we used to do out of our retail store were insane, and now the market is a lot tougher,” said Ms. Grieve, relaxing on a settee in her eclectic Queen Street store, the sole remaining bricks-and-mortar location.

“When customers come in the store you have to make sure you are ready to go — because half of the customers don’t even come into stores anymore. There is a whole generation of people out there who are more comfortable buying online than in a store. They are younger, and that is how they shop.”

While competition has increased from a plethora of online venues for original designs — ModCloth, Dress 911, Mona Et June and multiple designers on Etsy — the rise of so-called fast fashion has also hurt small businesses like Preloved. While consumers’ desire for low-cost clothing and the plight of disadvantaged garment workers in the Third World was highlighted by April’s garment factory collapse in Bangladesh, clothing prices have been declining for the better part of 15 years, and have fallen an average of 2.14% a year since 2008, according to Canada’s consumer price index. Deflation was spurred after Canada lifted import quotas on apparel eight years ago from 49 so-called “least developed countries,” such as Cambodia and Bangladesh, reducing costs to producers and consumers.

“Fast fashion has changed people’s perceptions about what they expect to pay for what they buy,” said Ms. Grieve, who took a leap of faith and shuttered the bulk of her retail locations to expand her wholesale business.

“It was tough for about 18 months because you get used to seeing year-after-year growth,” she said. But the gamble paid off after a period of flat revenue, Preloved is on track to do sales of $2-million this year, and aims to double that by 2015. It now has more than 350 wholesale clients — double the number it had before restructuring — ranging from small shops to larger chains such as Anthropologie, Roots and Hudson’s Bay Co. Sixty per cent of corporate revenue comes from Canada and the remainder comes from the United States, Europe and Asia.

Where retail used to account for 80% of revenue and wholesale 20%, that has now reversed.

Part of Preloved’s wholesale business success was its ability to trade on its reputation of strong design and marketing savvy: Ms. Grieve is a fixture and brand ambassador for clients to host expanded “pop-up” collections of her line at boutiques where Preloved is carried.

Another major shift to help Preloved build consistency and the capacity to grow much bigger was its decision to begin constructing parts of its garments using new fabric, while other sections were reserved for reclaimed clothing. Preloved is still the biggest manufacturer of reclaimed clothing in the world, using fabric from 100,000 vintage wool sweaters, 20,000 T-shirts, 30,000 dress shirts and 10,000 trench coats a year to make its garments.

Adding new fabric to make parts of the garments identical gives wholesale clients more confidence to order the line. “In these times, it is kind of scary to tell a wholesale client, ‘You’re going to order these, and you don’t know what you are going to get — but it will be nice, trust me!’ Now I can say, ‘The arms are black and the front will change, because it has the vintage fabric in it’.”

As for keeping a consumer website and the Queen Street retail store, Ms. Grieve said, it is important, for marketing purposes “and because I have the ear of my wholesale clients, I know their pain, I know what a Saturday afternoon is like. I sell to many independent retailers.”